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Private company prices hold up through downturn

The prices paid for private companies by private equity buyers have held steady in the third quarter of 2008, but deal volumes have plummeted.

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The prices paid for private companies by private equity buyers have held steady in the third quarter of 2008, but deal volumes have plummeted.

According to BDO Stoy Hayward’s latest Private Equity Price Index, multiples on sales to private equity buyers were relatively unchanged at 11.2 times, as compared to 11.1 times in the previous quarter, as vendors held off from selling at a discount in an economic downturn.

Deal volumes, however, have tailed off significantly, with private company sales to trade and private equity buyers falling 41 per cent from second quarter volumes to 567 deals.

“Since Q3 2008, however, the seizure in the banking market has meant that all deals have been affected, irrespective of size,” said BDO partner Jon Breach.

Breach predicted that as companies started to suffer from the economic downturn and default with lenders, there would be an increase in deal volume as a result of accelerated and distressed sales.